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Ruman Industrial Chemical Corporation, Karamsad Versus The Income Tax Officer, Ward 4, Anand

2017 (2) TMI 726 - ITAT AHMEDABAD

Penalty u/s.271(1)(c) - addition u/s 50 - Held that:- The assessee has highlighted all blocks of assets with specific plea to have never included the factory building in question therein. Needless to say, the same has also gone unrebutted except the fact that both the lower authorities have drawn their respective conclusions only on presumptive basis. We thus conclude that the Assessing Officer as well as CIT(A) have erred in invoking Section 50C of the Act qua assessee’s factory building sold g .....

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/Ahd/2014 - Dated:- 13-2-2017 - SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI S. S. GODARA, JUDICIAL MEMBER. For The Assessee : Shri T. P. Hemani, A.R. For The Revenue : Shri Prasoon Kabra, Sr. D.R. ORDER PER S. S. GODARA, JUDICIAL MEMBER These two assessee s appeals for assessment year 2008-09 arise against CIT(A)-I, Baroda s orders; both dated 03.02.2014, in cases nos. CAB/I- 168/13-14 & CAB/I-169/13-14 respectively, in proceedings under section 143(3) r.w.s. 147 of the Income Tax Act, .....

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er appeal seeks to delete Section 271(1)(c) penalty of ₹ 5,52,290/- imposed by both the lower authorities in view of the above quantum addition. Learned counsel representing assessee states very fairly that he does not wish to press for its legal plea challenging validity of the opening. We thus proceed to deal with merits of the case. 3. The assessee company is stated to be a chemical manufacturer. It had sold its factory building at Nandesari in the relevant previous year so as to declar .....

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e assessee appears to have strongly contested the said reason by pleading that it had not carried out any business activity since assessment year 2000-01. Its building sold was also not included in the block of assets for claiming depreciation even before setting down its above stated business. The assessee thus explained that Section 50 of the Act would not apply in given facts of the case. It further highlighted that it had closed the factory premises in question since 1996-97 and also that it .....

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assessee s factory building in question was in fact use for the purpose of its business and also included in the assets relevant for the purpose of claiming depreciation. He further declined to accept assessee s plea that its unabsorbed depreciation brought forward from all preceding assessment years pertained to plant and machinery, electric fitting along with furniture and fixtures. The Assessing Officer accordingly treated assessee s above stated long term capital gain as short term capital g .....

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hat the AO be directed to treat capital gain as long term capital gain. With regard to these grounds of appeal, the submission of the appellant as filed vide letter dated 27/01/2014 as reproduced in preceding paragraphs of this appellate order is not found to be acceptable. In the case of appellant, the returns of income have been filed for A.Yrs from 1997-98 to AY 2008-09. The AO in the assessment order u/s 143(3) r.w.s. 147 has mentioned that the factory building (i.e. the factory building on .....

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dered as depreciable asset whereas it has claimed plant and machinery and fixtures as depreciable assets. The appellant replied to the AO that all in the past years depreciation has been claimed only on plant and machinery, electric fittings and furniture and fixtures. As per the appellant no depreciation was claimed on factory building. However, the appellant could not produce any documentary evidences and details in support of its claim. The reply of the appellant was that since the matter was .....

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appellant on only plant and machinery and electrical fittings and furniture etc. and not on factory premises. The factory premise was used for manufacturing activities as plants and machinery etc. were installed in such factory premise and the factory premise can be said to be part of block of assets eligible for depreciation. The appellant has not been able to furnish details and evidences to show that the depreciation was not claimed on such factory premise. Non filing of evidences and detail .....

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d as Depreciable Asset and hence, provisions of section 50 of the Act should not be implied. From this submission of the appellant, the fact which is coming out is that it had claimed depreciation on the factory premise in initial years and since 1999-2000 it did not claim depreciation on such factory premise. But the fact is that once the depreciation on factory premise has been claimed by the appellant in the very beginning of the year, then this factory premise has to be treated as depreciabl .....

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e same has to be treated as depreciable business asset. In this regard support is drawn from the decision of Hon'ble High Court of Punjab and Haryana in the case of CIT Vs Santosh Structural & Alloys Ltd. 251 CTR 53 and from the decision of Hon'ble High Court Delhi in the case of CIT Vs I.K. International (P) Ltd. 206 Taxmann, 622. Thus, the legal position which is clearly emerging out from the decision of these two Hon'ble Courts and also from the decisions of many other Hon' .....

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is confirmed and ground of appeal no. 2.01 and 2.02 of the appellant are dismissed. 5. We have heard both the parties. Case file perused. There can hardly be any dispute so far as Section 50 of the Act is concerned that the same applies in the nature of a special provision for computation of capital gains arising from sale of depreciable assets. This special provision re-computes long term capital gains arising from transfer of capital assets forming part of a block of assets in respect of which .....

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